Russia To Reduce Oil Export Discount To $20 Per Barrel, Says Finance Minister

Due to Western sanctions imposed on Russia following the invasion of Ukraine, the country adopted a new approach to tax oil sales

Russia's finance ministry has said that the country intents to reduce the discount it uses to set taxes on the country's crude oil exports from $25 to $20 per barrel. Due to Western sanctions imposed on Russia following the invasion of Ukraine, the country adopted a new approach to tax oil sales. Russian President Vladimir Putin signed a law in February that established a fixed discount for tax calculations on Russia's main crude oil blend known as the Urals.

These changes were made to address the economic impact of the sanctions and alter the taxation framework for oil sales in the country. Western countries have also imposed a price cap of $60 per barrel on Russian crude oils. 

In an interview with Russian news site Argumenty I Fakt, the country's finance minister Anton Siluanov's on Tuesday said, "Now the estimated discount is $25 per barrel to Brent. We plan to reduce it to $20 per barrel. We are considering further measures to improve the calculation of taxes on oil exports. Brent is $80 a barrel today. Minus 20 - it turns out 60 dollars. At this price, we will collect 8 trillion rubles in oil and gas revenues."

According to a Reuters report, in the first six months of the financial year 2023-24, Russia saw a decline of 47 per cent in its oil and gas revenues compared to the previous year. The finance ministry attributed this decline to lower prices of Urals crude and a decrease in natural gas exports.

Siluanov also said that by the end of the year, the budget deficit will be around 2-2.5 per cent of the gross domestic product (GDP).

"We have enough of resources to meet the planned expenses and additional ones that arise," Siluanov said. 

India has enjoyed steep discounts on Russian crude oil since the Ukraine war, although paid higher than normal shipping rates. Indian refiners purchased less than 2 per cent of their entire supply of crude from Russia in pre-Ukraine war times, this surged up to 44 per cent due to discounted prices. However, according to a recent PTI report, the discount on Russian Urals grade has narrowed from levels of around $30 a barrel in the middle of last year to closer to $4 per barrel.